Pros and Cons of Owning a Business Franchise

Owning a Franchise Pic by Piotrus at Wikimedia Commons

As of 2007 there were nearly 230 different lines of business that you could open a franchise business in. The recession has not deterred professionals from thinking about operating their own company through a franchise. According to the United States Census Bureau automotive franchises were the most profitable franchises in 2009. New car dealer franchises generated revenues of $687.7 billion.

Gas Station and Convenience Store Business Franchises

Gas stations designed with convenience stores were the second most profitable line of business when it came to franchises. These establishments generated revenues of $131.1 billion. Coming in third was fast food restaurants; they generated a total of $112.6 billion in revenues.

Sheer numbers alone make it tempting to go out and start your own franchise business. After all, who doesn’t want to experience what people like Ray Kroc did after he founded McDonald’s on May 15, 1940? Personal success and business growth aside, there are pros and cons to consider before you start a franchise company.

Paperwork (generally you must complete an application, criminal and credit background checks, and a business plan to apply to own a franchise)
Capital (start-up costs to open and operate a franchise range from several thousand to over one million dollars)
Established brand name (unlike other business owners you won’t have to put in long hours and spend money to build a brand; that has already been done for you when you buy a franchise)
Training (franchisors have established teams that you can reach out to for training and support)
Research and Development (the franchisor actively conducts research and market development analysis and passes findings along to you, findings that can help grow your business)
Royalty payments (you have to pay the franchisor a percentage of your annual sales)
Over time you could open enough chains of a franchise to earn a sizable income

And as Randall Hansen, founder of Quintessential Careers, states, “The reputation of your franchise is only as good as that of the franchisor, so any difficulties that the franchisor encounters will have a direct impact on you.”

Applying to Own a Franchise

Before you submit an application to own a franchise, sit down with a team of professionals or your significant other and discuss the steps you will take to recoup start-up costs you put into the business. Also consider the number of hours that you might have to work during the first five to seven years that the franchise is open. And last, talk with two to three or more people who currently own a franchise to learn about even more pros and cons associated with owning a franchise. Trust your instincts. Owning a franchise could be one of the most rewarding ventures that you undertake. It could also provide you with fodder for stories of “I wish I hadn’t” if you do not do your homework.

This article opened with numbers. It will close with numbers as well. Entrepreneur recently released the top 10 franchises for 2010. And the winners are:

Subway – 31,445 franchises; start-up costs – $84,300
to $258,300
McDonald’s – 25,801; start-up costs – $995,900
to $1,842,700
7-Eleven – 35,141 franchises; start-up costs –
$40,500 to $775,300
Hampton Inn/Suites – 1,636 franchises; start-up costs
– $3,716,000 to $13,148,800
Supercuts – 1,028 franchises; start-up costs –
$111,000 to $239,700
H & R Block – 4,502 franchises; start-up
costs – $26,427 to $84,094
Dunkin’ Donuts – 8,924 franchises; start-up
costs – $537,750 to $1,765,300
Jani-King – 13,046 franchises; start-up costs –
$11,400 to $35,050
Servpro – 1,478 franchises; start-up costs –
$102,250 to $161,150
ampm Mini Market – 2,956 franchises; start-up
costs – $1,835,823 to $7,615,065